In our post of May 2, we discussed the Toronto Stock Exchange’s December 31, 2012 amendments to the Company Manual to require, among other things, that TSX listed issuers elect all of their directors annually. On July 10, the TSX issued a Staff Notice providing new guidance, and importantly for international listed issuers, setting out a framework for waiver applications.

The TSX will now consider waiver applications from inter-listed international issuers. Applications for waivers must address the following factors in support of the TSX granting the waiver:

  • the stock exchange or home market on which the issuer primarily trades as well as its the jurisdiction of incorporation or organization;
  • the level of trading in Canada and its home stock exchange or market. The TSX states that it will be more receptive to an application where at least 75% of the value and volume of the issuer's trading in the six months prior to the date of the application has occurred outside of Canada;
  • if the issuer's jurisdiction of incorporation is outside of Australia, the United Kingdom or the state of Delaware (or another U.S. state with corporate laws comparable to the state of Delaware) it must provide (i) detailed information on its compliance with director election standards and practices in its jurisdiction of incorporation, (ii) a description of the comparative director election practices of similar-sized issuers in its sector in its home market, and (iii) a description of the corporate governance regime that it is subject to;
  • if the issuer is from Australia, the United Kingdom or the state of Delaware (or another U.S. state with corporate laws comparable to the state of Delaware), it has to confirm it is in compliance with its home market standards.

If a waiver is granted, it will be effective for only one year or until the next annual general meeting. The TSX will also require that the reasons for requesting the waiver be disclosed by the issuer in its annual information circular.

The TSX’s receptivity to a waiver will certainly be welcomed by the many inter-listed Australian issuers as it now implicitly recognizes the sufficiency of the corporate governance regime on the Australian Securities Exchange, as well as the United Kingdom and Delaware.

For new TSX listing applicants, the Staff Notice states that inter-listed international issuers will not be required to meet these requirements at the time of listing. The director election requirements will only begin to apply when the issuer mails its materials for its first AGM after listing on the TSX but provided that the issuer has been listed on TSX for at least six months at that time.

The TSX also clarified director recommendation requirements for amendments to a listed issuer’s constating documents and provided further insight on the disclosure the TSX expects in news releases disclosing the voting results for the election of directors. For more information, see TSX Staff Notice 2013-0002.